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Moody’s Analytics U.S. Macro Outlook: Nearing The Threshold

Moody’s Analytics, a leading independent provider of economic forecasting, today released Chief Economist Mark Zandi’s US economic outlook for August. According to “
U.S. Macro Outlook: Nearing the Threshold,” the recent lag between GDP growth and U.S. job creation is unusual and unlikely to continue. Moody’s Analytics expects real U.S. GDP growth of 2.75% for the second half of 2013 and near 3% for 2014.

According to the report, weak GDP growth of 1.4% over the past year, is at odds with growth in gross domestic income and stronger job numbers. Historical data suggests that current U.S. job growth of 200,000 per month is consistent with a GDP growth rate as high as 3%. The disconnect between GDP growth and job growth may eventually be bridged by revisions, which will show GDP growth stronger than current data suggests, the report says.

“Weak GDP reflects temporarily weaker productivity growth and large government spending cuts,” Zandi said. “Encouragingly, reduced economic uncertainty and improving credit conditions will boost the private economy and lead to larger gains in both output and jobs.”

The report notes that the housing recovery will be a significant driver of job growth. While homebuilding and house prices have risen strongly since they hit bottom almost two years ago, the housing recovery has only begun. Housing starts are still running well below 1 million units per year, while the underlying demand for new homes supports an annual building rate closer to 1.7 million. Every new single family home supports more than four jobs in construction, manufacturing, transportation, financial services, retail, and a range of other services in the year the home is put up. Each multifamily unit supports slightly more than one job.

“The anticipated increase in homebuilding through mid-decade should thus add some 3 million jobs to the nation’s payrolls, a key to returning the economy to full employment,” Zandi added.